Econ Chapter 4-6 Graphs Questions and Answers
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
____
1.
According to this demand curve, how many movie videos will be demanded at a price of $10?
a. 400
c. 800
b. 600
d. 1000
____
2.
The movement shown in this graph represents a change in what?
a. quantity demanded
c. demand
b. marginal utility
____
d. demand elasticity
3.
Based on this graph, how many Beanie Babies™ were demanded at a price of $6 before they became a
fad?
a. 100
c. 300
b. 200
d. 400
____
4.
On Curve A in the graph, suppose the price dropped from $10 to $7. Would quantity demanded
increase or decrease and by how much?
a. Quantity demanded would decrease by 1 unit.
b. Quantity demanded would increase by 1 unit.
c. Quantity demanded would decrease by 5 units.
d. Quantity demanded would increase by 5 units.
____
5.
Find the price of $15 on the demand schedule. What point does this price and quantity correspond to in
the graph?
a. v
c. x
b. w
d. y
____
6.
a.
b.
c.
d.
____
7.
What does the movement from b' to b on the graph represent?
an increase in demand
an increase in quantity demanded
a decrease in demand
a decrease in quantity demanded
Study the illustration. At a price of $25, how much more of the product is demanded on curve D'D' than
on curve DD?
a. 2 units
c. 1 unit
b. 3 units
d. 4 units
Products
Can purchase be
delayed?
Are adequate
substitutes
available?
Does purchase
use a large
portion of
income?
____
____
8.
Fresh
tomatoes
Gasoline from
a particular
station
Gasoline
in general
Services of
medical
doctors
Butter
yes
yes
no
no
yes
yes
yes
no
no
yes
no
yes
yes
yes
no
a.
b.
c.
d.
Which products shown in the table are likely to have elastic demand?
gasoline in general, services of medical doctors
fresh tomatoes, gasoline from a particular station, butter
fresh tomatoes, gasoline in general, butter
gasoline from a particular station, gasoline in general, butter
a.
b.
c.
d.
Which products shown in the table are likely to have inelastic demand?
gasoline in general, services of medical doctors
fresh tomatoes, gasoline from a particular station, butter
fresh tomatoes, gasoline in general, butter
gasoline from a particular station, gasoline in general, butter
9.
____ 10.
According to the demand curves, at a price of $20, how many more mystery novels would Kara
demand than would Damien?
a. 0 more
c. 2 more
b. 1 more
d. 3 more
____ 11.
Assume that Damien and Kara are the only two people in the market for mystery novels. Based on the
graphs, what would be the market quantity demanded for mystery novels at a price of $5?
a. 5
c. 15
b. 10
d. 20
____ 12.
Based on the graph, how does the market demand for concert tickets change if the price increases from
$30 to $40?
a. the demand curve shifts to the right
b. the demand curve shifts to the left
c. quantity demanded decreases by 4,000
d. quantity demanded increases by 4,000
Quantity of Burritos Demanded by
All Consumers in the Market
Price
$7
$6
$5
$4
$3
$2
____ 13.
a. 2
b. 3
Consumer P
0
1
2
4
6
8
Consumer Q
0
2
3
5
6
10
Consumer R
0
1
3
5
8
10
Based on the table, what is the market demand for burritos at a price of $5?
c. 6
d. 8
____ 14.
Based on the table, at what price would the market demand for burritos be 14?
a. $3
c. $5
b. $4
d. $6
____ 15.
According to this supply curve, 400 movie videos will be supplied at what price?
a. $10
c. $14
b. $12
d. $16
____ 16.
The movement shown in this graph represents a change in what?
a. supply
c. supply elasticity
b. quantity supplied
d. production function
____ 17.
a.
b.
c.
d.
What does the movement shown on this graph represent?
a change in supply
a change in quantity supplied
the law of diminishing returns
a shift in the market supply curve
____ 18.
What does the movement from b to b' on the graph represent?
a. an increase in quantity supplied
c. a decrease in supply
b. a decrease in quantity supplied
d. an increase in supply
____ 19.
Study the illustration. At a price of $10, how many more units of the product are supplied on curve S'S'
than on curve SS?
a. 9
c. 3
b. 6
d. 12
____ 20.
a.
b.
c.
d.
____ 21.
What economic principle does the graph illustrate?
law of supply
law of diminishing marginal utility
law of diminishing returns
law of demand
According to the supply curves, at a price of $25, how many more soccer balls would ABC Corp.
supply than would XYZ Corp.?
a. 2 more
c. 7 more
b. 3 more
d. 11 more
____ 22.
Assume that ABC Corp. and XYZ Corp. are the only two firms that supply soccer balls. Based on the
graphs, what would be the market quantity of soccer balls supplied at a price of $20?
a. 3
c. 9
b. 6
d. 10
____ 23.
Based on the graph, how does the market supply of baseball gloves change if the price increases from
$25 to $35?
a. quantity supplied decreases by 9,000
b. quantity supplied increases by 9,000
c. quantity supplied decreases by 3,000
d. quantity supplied increases by 3,000
Quantity of Softballs Supplied by
All Firms in the Market
Price
$11
$9
$7
$5
$3
$1
Firm X
400
300
200
100
50
0
Firm Y
500
400
200
50
0
0
Firm Z
1,000
800
600
300
100
0
____ 24.
Based on the table, what is the market supply of softballs at a price of $7?
a. 1,000
c. 600
b. 200
d. 800
____ 25.
Based on the table, at what price would the market supply of softballs be 1,500?
a. $5
c. $9
b. $3
d. $11
____ 26.
Production Schedule
Number of
Total
Marginal
Workers
Product
Product*
0
0
0
1
7
7
2
20
13
3
38
18
4
62
24
5
90
28
6
110
20
7
129
19
8
138
9
9
144
6
10
148
4
11
145
–3
12
135
–10
*All figures in terms of output per day.
In this production schedule, production Stage III begins with the addition of which numbered worker?
a. 10
c. 8
b. 6
d. 11
Production Schedule
Number of
Workers
0
1
2
3
4
5
6
7
8
9
10
11
12
Costs
Total
Product
Marginal
Product*
Total
Fixed
Costs
Total
Variable
Costs
Total
Costs
Marginal
Costs
0
7
20
38
62
90
110
129
138
144
148
145
135
0
7
13
18
24
28
20
19
9
6
4
–3
–10
$50
50
50
50
50
50
50
50
50
50
50
50
50
$0
90
180
270
360
450
540
630
720
810
900
990
1,080
$50
140
230
320
410
500
590
680
770
860
950
1,040
1,130
-$12.86
6.92
5.00
3.75
3.21
4.50
4.74
10.00
15.00
22.50
---
*All figures in terms of output per day.
____ 27.
Based on the table, what is the variable cost of the third worker?
a. $270
b. $5.00
____ 28.
c. $90
d. $320
What is the variable input in this production and cost table?
a. units of product
c. capital
b. units of cost
d. labor
Production Schedule
Number
of
Workers
Total
Product
Marginal
Product*
0
0
0
1
7
7
2
20
13
3
38
18
4
62
24
5
90
28
6
110
20
7
129
19
8
138
9
9
144
6
10
148
4
11
145
–3
12
135
–10
*All figures in terms of output per day.
____ 29.
a. 1
b. 2
____ 30.
Costs
Revenues
Profit
Total
Fixed
Costs
Total
Variable
Costs
Total
Costs
Marginal
Costs
Total
Revenue
Marginal
Revenue
Total
Profit
$50
50
50
50
50
50
50
50
50
50
50
50
50
$0
90
180
270
360
450
540
630
720
810
900
990
1,080
$50
140
230
320
410
500
590
680
770
860
950
1,040
1,130
-$12.86
6.92
5.00
3.75
3.21
4.50
4.74
10.00
15.00
22.50
---
$0
105
300
570
930
1,350
1,650
1,935
2,070
2,160
2,220
2,175
2,025
-$15
15
15
15
15
15
15
15
15
15
15
15
–$50
–35
70
250
520
850
1,060
1,210
1,300
1,300
1,270
1,135
895
According to the table, the company must hire at least how many workers to earn a profit?
c. 3
d. 4
In the table, how much extra revenue does the company generate by producing and selling one
additional unit of output?
a. $90
c. $15
b. $13
d. $50
____ 31.
Suppose the demand curve shifts from D1 to D2, as shown on the graph. How do the quantity supplied
and quantity demanded change at the new equilibrium price?
a. Quantity supplied increases and quantity demanded decreases.
b. Quantity supplied decreases and quantity demanded increases.
c. Both quantity supplied and quantity demanded increase.
d. Both quantity supplied and quantity demanded decrease.
____ 32.
Market Demand and Supply Schedules
Price
$20
18
16
14
12
10
Quantity
Demanded
0
2
4
7
11
13
Quantity
Supplied
20
16
10
7
5
0
Surplus/
Shortage
20
14
6
0
?
–13
In the table, market equilibrium will occur at what price?
a. $20
c. $14
b. $16
d. $10
____ 33.
In the graphs, which curve represents the “worst case” yield for soybean farmers?
a. DD
c. S1S1
b. SS
d. S2S2
____ 34.
On the graph, suppose that demand for gold stands at D1D1. Then the opening of a new gold mine shifts
the supply curve from S1S1 to S2S2. How does this shift affect price?
a. price rises from 280 to 400
c. price rises from 400 to 850
b. price declines from 400 to 280
d. price declines from 850 to 400
____ 35.
In Panel A of the graph, the farmer produced 10,000 bushels of wheat under the loan program. At the
target price, how many bushels did the farmer sell on the open market?
a. 8,000 bushels
c. 10,000 bushels
b. 9,000 bushels
d. 2,000 bushels
____ 36.
In Panel A of the graph, the farmer produced 10,000 bushels of wheat under the loan program. If the
program did not exist, how many bushels would the farmer have produced and sold?
a. 8,000 bushels
c. 10,000 bushels
b. 9,000 bushels
d. 2,000 bushels
Short Answer
APPLYING SKILLS
Using Graphs: Study the graph and answer the questions below.
37.
How many widgets were in demand when the price was $4.50?
38.
If the demand for widgets at $4.50 was met, what would be the resulting total
revenue?
39.
Does this graph demonstrate the Law of Demand? Explain.
40.
How many widgets were in demand when the price was $1.50?
41.
If the demand for widgets at $1.50 were met, what would be the resulting total
revenue?
42.
What would be the quantity demanded if the price were then lowered from $1.50 to
$1? Is demand elastic, unit elastic, or inelastic between these two prices? Explain.
43.
Quantity Demanded
Price
$80
70
60
50
40
30
Old Demand
Curve
0
2
4
7
12
15
New Demand
Curve
1
5
8
10
15
22
In the table, does the movement in the demand curve from the old to the new
represent a change in demand or a change in quantity demanded? Explain.
44.
What conclusion can you draw from the slope of the demand curve in this
illustration?
45.
Summarize what Point a on the graph represents.
APPLYING SKILLS
Using Graphs: Study the graph and answer the questions below.
46.
How many cupholders are producers willing to supply at a price of $2.50?
47.
What would be the quantity supplied if the price increased from $2.50 to $5.00?
48.
How many cupholders are producers willing to supply at a price of $3.00?
49.
Does this graph demonstrate the Law of Supply? Explain.
50.
Is supply elastic, unit elastic, or inelastic between the prices of $2.50 and $5.00?
Explain.
51.
At what price were the fewest cupholders produced?
52.
Summarize what Point b on the graph represents.
53.
Production Schedule
Number of
Workers
0
1
2
3
4
5
6
7
8
9
Total
Product
0
7
20
38
62
90
110
129
138
144
Marginal
Product*
0
7
13
18
24
28
20
19
9
6
10
148
4
11
145
–3
12
135
–10
*All figures in terms of output per day.
In this production schedule, production Stage II begins with the addition of which
numbered worker? Explain how you know.
APPLYING SKILLS
Using Tables: Study the table and answer the questions below.
Annual Supply and Demand for
portable CD players
(in Thousands)
Price
$40.00
$42.50
$45.00
$47.50
$50.00
$52.50
$55.00
$57.50
$60.00
$62.50
Quantity
Demanded
14
12
11
9
7
5
4
3
2
1
Quantity
Supplied
0
1
2
3
4
5
7
9
10
12
54.
What is the equilibrium price for portable CD players?
55.
What would be the result of a $45.00 price ceiling on portable CD players?
56.
If only one firm supplied all CD players and that firm decided to produce 8,000 CD
players priced at $57.50, what would be the result?
APPLYING SKILLS
Using Tables: Study the table and answer the questions below.
Annual Supply and Demand for VCRs
(in Thousands)
Price
Quantity
Demanded
Quantity
Supplied
$100
$110
$120
$130
$140
$150
$160
$170
$180
$190
23
22
20
18
16
14
10
6
3
2
3
4
5
10
12
14
18
26
30
34
57.
What is the equilibrium price for VCRs?
58.
If only one firm supplied all VCRs and that firm decided to produce 16,000 of them at
$160, what would be the result?
59.
What would be the result of a $110 price ceiling on VCRs?
60.
What is the equilibrium price on this graph? Explain what that means.
61.
Market Demand and Supply Schedules
Quantity
Quantity
Surplus/
Price
$20
18
16
14
12
10
Demanded
0
2
4
7
11
13
Supplied
20
16
10
7
5
0
Shortage
20
14
6
0
?
–13
At a price of $12 in the table, does the market have a surplus or shortage? of how
many units? Explain how you know.
Essay
62.
Demand Schedule for CDs
Price per CD
$10
$12
$14
$16
$18
$20
Quantity Demanded
(in millions)
1,100
900
700
500
300
100
Use the information in the demand schedule to explain the law of demand.
63.
Which demand curve on the graph is more elastic, Curve A or Curve B? Explain.
64.
This graph shows two formats in which people can buy music—on vinyl records or
on CDs. Describe the trend in sales shown for both formats. Do you think sales of
one format affect the sales of the other? Explain.
65.
On demand curve DD shown on the graph, how do expenditures change when the
price increases from $2 to $3? What does this tell you about the elasticity of the
demand curve? Explain.
66.
Is demand curve DD on the graph elastic, inelastic, or unit elastic? Use numbers
from the graph to explain how you know.
67.
Is demand curve DD on the graph elastic, inelastic, or unit elastic? Use the
expenditures test to explain how you know.
68.
Supply Schedule for CDs
Price per CD
$10
$12
$14
$16
$18
$20
Quantity supplied
(in millions)
100
300
500
700
900
1,100
Use the information on this supply schedule to explain the law of supply.
69.
On supply curve SS shown on the graph, how does the quantity supplied change when
the price increases from $1 to $2? What does this tell you about the elasticity of the
supply curve? Explain.
70.
Is supply curve SS on the graph elastic, inelastic, or unit elastic? Use numbers from
the graph to explain how you know.
71.
Is supply curve SS on the graph elastic, inelastic, or unit elastic? Compare
proportional changes to explain how you know.
Production Schedule
Number of
Total
Marginal
Workers
Product
Product*
0
0
0
1
7
7
2
20
13
3
38
18
4
62
24
5
90
28
6
110
20
7
129
19
8
138
9
9
144
6
10
148
4
11
145
–3
12
135
–10
*All figures in terms of output per day.
72.
In this production schedule, what does the number 24 in the Marginal Product
column mean and how was it computed?
73.
Production Schedule
Number of
Workers
Costs
Total
Product
Marginal
Product*
Total
Fixed
Costs
Total
Variable
Costs
Total
Costs
Marginal
Costs
0
7
20
38
62
90
110
129
138
144
148
145
135
0
7
13
18
24
28
20
19
9
6
4
–3
–10
$50
50
50
50
50
50
50
50
50
50
50
50
50
$0
90
180
270
360
450
540
630
720
810
900
990
1,080
$50
140
230
320
410
500
590
680
770
860
950
1,040
1,130
-$12.86
6.92
5.00
3.75
3.21
4.50
4.74
10.00
15.00
22.50
---
0
1
2
3
4
5
6
7
8
9
10
11
12
*All figures in terms of output per day.
In the table, what does the number 3.75 in the Marginal Cost column mean? Explain
how it was computed.
Production Schedule
Costs
Revenues
Profit
Number
of
Workers
Total
Product
Marginal
Product*
Total
Fixed
Costs
Total
Variable
Costs
Total
Costs
Marginal
Costs
Total
Revenue
Marginal
Revenue
Total
Profit
0
1
2
3
4
5
6
7
8
0
7
20
38
62
90
110
129
138
0
7
13
18
24
28
20
19
9
$50
50
50
50
50
50
50
50
50
$0
90
180
270
360
450
540
630
720
$50
140
230
320
410
500
590
680
770
-$12.86
6.92
5.00
3.75
3.21
4.50
4.74
10.00
$0
105
300
570
930
1,350
1,650
1,935
2,070
-$15
15
15
15
15
15
15
15
–$50
–35
70
250
520
850
1,060
1,210
1,300
9
144
6
10
148
4
11
145
–3
12
135
–10
*All figures in terms of output per day.
50
50
50
50
810
900
990
1,080
860
950
1,040
1,130
15.00
22.50
---
2,160
2,220
2,175
2,025
15
15
15
15
1,300
1,270
1,135
895
74.
In the table, the break-even point is between what units of total product? Explain how
you know.
75.
In the table, the company will reach its profit-maximizing quantity of output when it
hires which numbered worker? Explain how you know.
76.
Suppose the government sets a maximum rent on government-controlled apartments,
as shown by the dotted line in the graph. Use the information on the graph to explain
the result.
77.
Suppose the government sets a minimum wage at $5.15 per hour, as shown by the
dotted line in the graph. Use the information on the graph to explain the result.
78.
Market Demand and Supply Schedules
Price
$20
18
16
14
12
10
Quantity
Demanded
0
2
4
7
11
13
Quantity
Supplied
20
16
10
7
5
0
Surplus/
Shortage
20
14
6
0
?
–13
Suppose sellers of the product described in the table set their price at $18. What
evidence will they see that tells them that this price is too high? Use supply and
demand concepts to explain how the sellers in this example will likely adjust their
price.
79.
The two graphs have identical supply curves representing different possible soybean
yields. Based on the graphs, what can you conclude about the relationship between
demand elasticity and the degree of price fluctuation across possible yields? Explain.
80.
In Panel B of the graph, the farmer produced 10,000 bushels of wheat under the
deficiency payments program. How much money did the farmer receive from selling
wheat on the open market? How much money did the farmer receive from the
government as a deficiency payment? Explain and show your work.
Econ Chapter 4-6 Graphs
Answer Section
MULTIPLE CHOICE
1. ANS:
MSC:
2. ANS:
MSC:
3. ANS:
MSC:
4. ANS:
MSC:
5. ANS:
MSC:
6. ANS:
MSC:
7. ANS:
MSC:
8. ANS:
MSC:
9. ANS:
MSC:
10. ANS:
MSC:
11. ANS:
MSC:
12. ANS:
MSC:
13. ANS:
MSC:
14. ANS:
MSC:
15. ANS:
STO:
16. ANS:
MSC:
17. ANS:
MSC:
18. ANS:
MSC:
19. ANS:
MSC:
20. ANS:
MSC:
21. ANS:
STO:
22. ANS:
D
DIF: Easy
REF: Page 91
STO:
Document Based Question
C
DIF: Easy
REF: Page 96
STO:
Document Based Question
B
DIF: Easy
REF: Page 96
STO:
Document Based Question
B
DIF: Average
REF: Page 95
STO:
Document Based Question
C
DIF: Easy
REF: Page 90
STO:
Document Based Question
C
DIF: Average
REF: Page 96
STO:
Document Based Question
A
DIF: Average
REF: Page 96
STO:
Document Based Question
B
DIF: Average
REF: Page 102
STO:
Document Based Question
A
DIF: Average
REF: Page 102
STO:
Document Based Question
B
DIF: Average
REF: Page 91
STO:
Document Based Question
C
DIF: Average
REF: Page 91
STO:
Document Based Question
C
DIF: Average
REF: Page 91
STO:
Document Based Question
D
DIF: Average
REF: Page 91
STO:
Document Based Question
B
DIF: Average
REF: Page 92
STO:
Document Based Question
B
DIF: Easy
REF: Pages 114-115
EPS3
MSC: Document Based Question
A
DIF: Easy
REF: Page 113
STO:
Document Based Question
B
DIF: Easy
REF: Page 115
STO:
Document Based Question
D
DIF: Average
REF: Page 115
STO:
Document Based Question
B
DIF: Average
REF: Page 114
STO:
Document Based Question
C
DIF: Average
REF: Page 125
STO:
Document Based Question
B
DIF: Average
REF: Pages 114-115
EPS3
MSC: Document Based Question
C
DIF: Average
REF: Page 115
STO:
EPS3
EPS3
EPS3
EPS3
EPS3
EPS3
EPS3.a
EPS3.a
EPS3.a
EPS3
EPS3
EPS3
EPS3.a
EPS3.a
EPS3
EPS3
EPS3
EPS3
EPS3
EPS3
MSC:
23. ANS:
MSC:
24. ANS:
MSC:
25. ANS:
MSC:
26. ANS:
MSC:
27. ANS:
MSC:
28. ANS:
MSC:
29. ANS:
MSC:
30. ANS:
MSC:
31. ANS:
MSC:
32. ANS:
MSC:
33. ANS:
MSC:
34. ANS:
MSC:
35. ANS:
MSC:
36. ANS:
MSC:
Document Based Question
D
DIF: Average
Document Based Question
A
DIF: Average
Document Based Question
C
DIF: Average
Document Based Question
D
DIF: Average
Document Based Question
C
DIF: Average
Document Based Question
D
DIF: Average
Document Based Question
B
DIF: Easy
Document Based Question
C
DIF: Average
Document Based Question
C
DIF: Average
Document Based Question
C
DIF: Average
Document Based Question
D
DIF: Average
Document Based Question
B
DIF: Average
Document Based Question
A
DIF: Challenging
Document Based Question
B
DIF: Challenging
Document Based Question
REF: Page 114
STO: EPS3
REF: Page 114
STO: EPS3.a
REF: Page 114
STO: EPS3.a
REF: Page 125
STO: EPS3.a, EG4
REF: Page 129
STO: EPS3.a, EG4
REF: Page 128
STO: EPS3.a
REF: Page 125
STO: EPS3.a, EG4
REF: Page 129
STO: EPS3.a
REF: Page 145
STO: EPS3
REF: Page 143
STO: EPS3
REF: Page 146
STO: EPS3
REF: Page 147
STO: EPS3
REF: Page 154
STO: EPS3, EHPS6.a
REF: Page 154
STO: EPS3, EHPS6.a
STO: EPS3
MSC: Document Based Question
SHORT ANSWER
37. ANS:
1,000 widgets
DIF: Average
NOT: Widgets
38. ANS:
$4,500
REF: Page 90
DIF: Challenging REF: Page 90
STO: EPS3
MSC: Document Based Question
NOT: Widgets
39. ANS:
Yes, because there is an inverse relationship between the price of the widget and the quantity demanded.
DIF: Average
NOT: Widgets
40. ANS:
REF: Page 91
STO: EPS3
MSC: Document Based Question
3,000 widgets
DIF: Average
NOT: Widgets
41. ANS:
$4,500
REF: Page 90
STO: EPS3
MSC: Document Based Question
DIF: Average
REF: Page 90
STO: EPS3
MSC: Document Based Question
NOT: Widgets
42. ANS:
At $1.00 (a 30% reduction in price) the quantity demanded is 4,500 (a 30% increase). Demand is, therefore,
unit elastic because the change in price led to a proportional change in the quantity demanded.
DIF: Challenging REF: Page 90
STO: EPS3
MSC: Document Based Question
NOT: Widgets
43. ANS:
The shift from the old to the new demand curve represents a change in demand, because a different quantity is
demanded at every price.
DIF: Average
REF: Page 89
STO: EPS3.a
MSC: Document Based Question
44. ANS:
The demand curve slopes downward, which means that more will be demanded at lower prices, and fewer at
higher prices.
DIF: Average
REF: Page 91
STO: EPS3
MSC: Document Based Question
45. ANS:
Point a represents the total quantity of concert tickets demanded (6,000) by everyone who is willing and able
to buy concert tickets at a price of $40.
DIF: Average
46. ANS:
3,000 cupholders
REF: Page 91
STO: EPS3
MSC: Document Based Question
DIF: Average
NOT: Cupholders
47. ANS:
7,000 cupholders
REF: Page 114
STO: EPS3
MSC: Document Based Question
DIF: Average
NOT: Cupholders
48. ANS:
4,000 cupholders
REF: Page 114
STO: EPS3
MSC: Document Based Question
DIF: Average
REF: Page 114
STO: EPS3
MSC: Document Based Question
NOT: Cupholders
49. ANS:
Yes, because more cupholders are produced as the price for cupholders increases.
DIF: Challenging
NOT: Cupholders
REF: Page 113
STO: EPS3
MSC: Document Based Question
50. ANS:
Supply is elastic between $2.50 and $5.00 because a 100% price increase resulted in a change in quantity
supplied of more than 100%.
DIF: Challenging
NOT: Cupholders
51. ANS:
$2.00
REF: Page 119
STO: EPS3
MSC: Document Based Question
DIF: Average
REF: Page 116
STO: EPS3
MSC: Document Based Question
NOT: Cupholders
52. ANS:
Point b represents the total quantity of baseball gloves supplied (9,000) by all suppliers of baseball gloves at a
price of $45.
DIF: Average
REF: Page 115
STO: EPS3
MSC: Document Based Question
53. ANS:
In this production schedule, Stage II starts with the addition of the sixth worker, because with the addition of
this unit of variable input, output begins to increase at a diminishing rate.
DIF: Challenging REF: Page 125
MSC: Document Based Question
54. ANS:
$52.50
STO: EPS3.a, EG4
DIF: Average
REF: Page 144
NOT: CDS
55. ANS:
a shortage of 9,000 portable CD players
STO: EPS3
DIF: Challenging REF: Page 144
MSC: Document Based Question
56. ANS:
a surplus of 5,000 portable CD players
STO: EPS3, EPS3.b
NOT: CDS
DIF: Average
NOT: CDS
57. ANS:
$150
REF: Page 144
STO: EPS3
MSC: Document Based Question
DIF: Average
REF: Page 144
NOT: VCRS
58. ANS:
a surplus of 6,000 portable VCRs
STO: EPS3
MSC: Document Based Question
DIF: Challenging REF: Page 144
NOT: VCRS
59. ANS:
a shortage of 18,000 VCRs
STO: EPS3
MSC: Document Based Question
MSC: Document Based Question
DIF: Average
REF: Page 144
STO: EPS3
MSC: Document Based Question
NOT: VCRS
60. ANS:
The equilibrium price is $14. This is the price at which the amount producers are willing to supply is equal to
the amount consumers are willing and able to buy.
DIF: Easy
REF: Page 144
STO: EPS3
MSC: Document Based Question
61. ANS:
A shortage of 6 units occurs at a price of $12, because at this price, quantity demanded exceeds quantity
supplied by 6 units.
DIF: Average
REF: Page 144
STO: EPS3.a
MSC: Document Based Question
ESSAY
62. ANS:
At $20 per CD, 100 million CDs will be demanded. At $18, the quantity demanded rises to 300 million. In
fact, at each lower price in the demand schedule, the quantity demanded increases. This is the law of demand:
As price falls, quantity demanded increases.
DIF: Average
REF: Page 91
STO: EPS3.a
MSC: Document Based Question
63. ANS:
Curve B is more elastic than Curve A. Elasticity refers to consumers’ responsiveness to an increase or
decrease in price of a product. The larger the consumer response to a change in price, the more elastic the
curve. On Curve B, when the price drops by only $1, the quantity demanded increases dramatically. On Curve
A, a $1 price drop would not change the quantity demanded very much.
DIF: Challenging REF: Pages 101-102
STO: EPS3
MSC: Document Based Question
64. ANS:
Sales of vinyl singles are trending down, as sales of CD singles are trending up. Sales of one format affect the
other because they are substitutes.
DIF: Challenging REF: Page 98
STO: EPS3
MSC: Document Based Question
65. ANS:
When the price increases from $2 to $3, expenditures decrease from $8 to $6. When price and total
expenditures change in opposite directions, the demand curve is elastic.
DIF: Challenging REF: Page 102
STO: EPS3
MSC: Document Based Question
66. ANS:
Demand curve DD is inelastic, because a decrease in price from $3 to $2 results in a decrease in expenditures
from $6 to $5. When price and expenditures change in the same direction, the curve is inelastic.
DIF: Challenging REF: Pages 102-104
STO: EPS3
MSC: Document Based Question
67. ANS:
Demand curve DD is unit elastic. When the price decreases from $3 to $2, total expenditures remain $6.
When a price change results in no change in expenditures, the curve is unit elastic.
DIF: Challenging REF: Pages 103-104
STO: EPS3
MSC: Document Based Question
68. ANS:
At $10 per CD, 100 million CDs will be supplied. At $12, the quantity supplied rises to 300 million. In fact, at
each higher price in the supply schedule, the quantity supplied rises. This is the law of supply: price and
quantity supplied move in the same direction. As the price rises, the quantity supplied generally rises. As the
price falls, the quantity supplied also falls.
DIF: Average
REF: Page 113
STO: EPS3.a
MSC: Document Based Question
69. ANS:
Doubling the price from $1 to $2 causes the quantity supplied to triple, from 2 to 6. Because a change in price
results in a more-than-proportional change in quantity supplied, the supply curve is elastic.
DIF: Challenging REF: Pages 119-120
STO: EPS3
MSC: Document Based Question
70. ANS:
Doubling the price from $1 to $2 causes the quantity supplied to rise by only 50%, from 2 to 3. Because a
change in price results in a less-than-proportional change in quantity supplied, the supply curve is inelastic.
DIF: Challenging REF: Page 119
STO: EPS3
MSC: Document Based Question
71. ANS:
Doubling the price from $1 to $2 causes the quantity supplied double as well, from 2 to 4. Because a change
in price results in a proportional change in quantity supplied, the supply curve is unit elastic.
DIF: Challenging REF: Page 119
STO: EPS3
MSC: Document Based Question
72. ANS:
The number 24 is the extra output or change in total product caused by the addition of the fourth worker. It
was computed by subtracting 38, the total product produced by 3 workers, from 62, the total product produced
by 4 workers.
DIF: Average
REF: Page 124
STO: EPS3.a
MSC: Document Based Question
73. ANS:
The 3.75 is the extra cost incurred when the business produced one additional unit of the product. Because
fixed costs do not change from one level of production to another, marginal cost is the per-unit increase in
variable costs that stems from using additional factors of production. In this example, the variable cost of
adding the fourth worker (and every other worker) is $90. The addition of the fourth worker adds 24 units to
production. Thus, the marginal cost is computed as $90/24 units = $3.75 cost per additional unit.
DIF: Challenging REF: Pages 127-129
STO: EPS3.a
MSC: Document Based Question
74. ANS:
The break-even point is between 7 and 20 units of total product. This is the total product the business needs to
sell in order to cover its total costs. At 7 units, total revenue of $105 does not cover total costs of $140.
However, at 20 units, total revenue of $300 does cover total costs of $230. Therefore, the break-even point
falls somewhere between these two levels of output.
DIF: Challenging
75. ANS:
REF: Page 131
STO: EPS3.a
MSC: Document Based Question
The company will reach its profit-maximizing quantity of output when marginal cost and marginal revenue
are equal. In this case, that quantity of output occurs when the ninth worker is hired. At that point, marginal
cost and marginal revenue are both $15.
DIF: Challenging REF: Page 131
STO: EPS3.a
MSC: Document Based Question
76. ANS:
A shortage of 2 million apartments will result. At a rent of $600, 4 million people will want to rent
apartments, but apartment owners will be willing to supply only 2 million apartments.
DIF: Challenging REF: Page 152
STO: EPS3, EHPS6
MSC: Document Based Question
77. ANS:
A surplus of 2 million workers will result. At the minimum wage of $5.15 per hour, 4 million people will
want jobs, but employers will be willing to offer only 2 million jobs.
DIF: Challenging REF: Page 152
STO: EPS3, EPS3.b, EGPS8.f
MSC: Document Based Question
78. ANS:
If sellers set a price that is too high, they will see a surplus of unsold products build up on their shelves and in
their warehouses. This surplus tells them that the price is too high, and they must lower their price to attract
more buyers and dispose of the surplus. In this example, the $18 price will result in a surplus of 14 units.
These sellers will likely reduce their price and examine the results on their inventories until they reach the
equilibrium price of $14, where the quantity supplied just equals the quantity demanded.
DIF: Challenging REF: Page 144
STO: EGHPS2.e, EPS3.a
MSC: Document Based Question
79. ANS:
With the inelastic demand curve in Graph A, different yields result in a relatively wide fluctuation in price,
from $5 to $20 per bushel. The elastic demand curve in Graph B results in a smaller price fluctuation, ranging
from $8 to $10 per bushel for the different possible yields. We can conclude that, for different possible yields,
price fluctuates more widely if demand is inelastic than if it is elastic.
DIF: Challenging REF: Page 146
STO: EPS3
MSC: Document Based Question
80. ANS:
Based on the graph, the farmer made $25,000 by selling 10,000 bushels at $2.50 each on the open market.
Because this was $1.50 below the target price of $4.00 a bushel, the farmer received a deficiency payment of
$1.50 X 10,000 bushels = $15,000.
DIF: Challenging REF: Page 153
MSC: Document Based Question
STO: EPS3, EHPS6